EC 3225 REAL ESTATE ECONOMICS – LEVEL 5 UK CREDITS: 15 (Updated Spring 2015)

DEREE COLLEGE SYLLABUS FOR:

PREREQUISITES: EC 1000 Principles of Microeconomics EC 1101 Principles of Macroeconomics

CATALOG DESCRIPTION: The economies of the real estate market. Investment in real property. The development process. The construction industry. Land use and property values. The growth of urban areas. Housing finance & housing policy. Models of the housing market. Property price indices. Real estate crisis management.

RATIONALE: The course enhances the employment opportunities of economics graduates in the real estate sector (e.g., in property investment companies, property mutual funds, real estate brokers, banks, insurance companies, and big construction companies), and also prepares them to pursue post-graduate studies in the fields of urban or regional economics or property finance and investment.

LEARNING OUTCOMES: As a result of taking the course students will be in a position to: 1. Demonstrate detailed knowledge of the operation of the forces of supply and demand in a property market, describe the interaction of a RE market with the wider economy via the DiPasquale-Wheaton model, and assess the difference between ‘rational’ and ‘myopic’ price formation as well as the relevance of this difference to building cycles. 2. Identify the processes that shape the patterns of urban land use and the growth of urban areas. 3. Apply investment appraisal methods on real estate, chiefly on the redevelopment timing problem. 4. Analyze the development process, including the operation of the construction industry, and contrast the Greek and the British/American models of private housing provision. 5. Demonstrate understanding of the mechanics of housing finance, and of particular types of housing loans. 6. Demonstrate knowledge of the problems involved in constructing property price indices, and the pros and cons of different methods, e.g., the hedonic price method.

METHOD OF TEACHING AND LEARNING: In congruence with the learning and teaching strategy of the college, the following tools are used:

 Classes consist of lectures and class discussions of recent articles in economic journals assigned by the instructor.

 Office hours: students are encouraged to make full use of the office hours of their instructor, where they can ask questions and go over lecture material.

 Use of a blackboard site, where instructors post lecture notes, assignment instructions, timely announcements, as well as additional resources.

ASSESSMENT:

In-class, 1-hour, "diagnostic" test – formative 0 problems/essay questions combination In-class midterm examination (1-hour) – summative 40 problems/essay questions combination Final examination (2-hour, comprehensive) – summative 60 problems/essay questions combination

The formative test aims to prepare students for the final examination. The midterm examination tests Learning Outcomes 1, 3, 5 The final examination tests Learning Outcomes 2, 4, 6

READING LIST: (A) Textbook(s): (1) N. Pirounakis, 2013: Real Estate Economics: A point- to-point handbook (Routledge, UK). (2) Jack Harvey & Ernie Jowsey, 2004. Urban Land Economics (Palgrave-Macmillan, 6 th edition).

(B) Other: (1) Di Pasquale, D. & Wheaton, W.C (1992): “The markets for real estate assets and space: a conceptual framework”, in Journal of the American Real Estate and Urban Economics Association , v. 20, 1, pp.181-197. (2) Fisher, J. D. (1992): “Integrating Research on Markets for Space and Capital”, in Journal of the American Real Estate and Urban Economics Association , V. 20, 1, pp. 161-180. (3) Colwell, P. F. (2002): “Tweaking the DiPasquale- Wheaton Model”, in Journal of Housing Economics , 11, pp. 24-39 (4) Wheaton, W.C. (1999): “Real estate ‘cycles’: Some fundamentals”, in Real Estate Economics , v. 27, n. 2, pp. 209-230. (5) Meen, G. (2005): “On the Economics of the Barker Review of Housing Supply”, in Housing Studies , v. 20, n. 6, pp. 949-971. (6) Maclennan, D. (2005): Housing Policies: New Times, New Foundations. Paper commissioned by the 2 Joseph Rowntree Foundation. In http://www.jrf.org.uk/publications/housing-policies-new- times-new-foundations. (7) Vermeulen, W. & Rouwendal, J. (2007): On the price (in)elasticity of Dutch housing supply . Paper presented in the 2007 ENHR Int’l Conference, Rotterdam, 25-28 June. In http://www.enhr2007rotterdam.nl/documents/W04_paper _Vermeulen_Rouwendal.pdf. (8) Ellis, L. (2008): The housing meltdown: Why did it happen in the United States ? BIS Working Paper 259, Sept. (9) Booth, P.M. & Marcato, G. (2004): “The measurement and modeling of commercial real estate performance”, in British Actuarial Journal , vol. 10, part 1, no.45, pp. 5-61. In http://www.actuaries.org.uk/_data/assets/pdf_file/0020/31 718/sm20030922.pdf. (10) Fleming, M.C. & Nellis, J.G. (2010): The Halifax House Price Index: Technical Details . In http://www.lloydsbankinggroup.com/media/word/HPI/13. 08.09TechDetails.doc

RECOMMENDED MATERIAL: (1) DiPasquale, D&Wheaton, W.C., 1995. Urban Economics and Real Estate Markets (Prentice Hall). ISBN: 978-0132252447. (2) M. Ball, C. Lizieri, B.G. Macgregor, 2008. The Economics of Commercial Property Markets (Routledge, 2nd ed.). ISBN: 978-0-415-45297-7. (3) Ellerman, D. (2004): The Mathematics of Real Estate Appraisal. In http://papers.ssrn.com/so13/papers.cfm?abstract_id =550001 (4) Robinson, R (1979). Housing Economics and Public Policy (Macmillan).

SOFTWARE REQUIREMENTS: Students should be familiar with Excel and Word, especially if, after the course has gone beyond the experimental stage, case analyses become part of the learning activities of the course.

WWW RESOURCES: Global Property Guide: http://www.globalpropertyguide.com/ UK Property Guide: http://www.ukpropertyguide.co.uk/ Real Estate Investment Analysis Software http://www.invest-2win.com/ International Real Estate Digest: http://www.ired.com/ Housing Again: http://www.housingagain.web.net/ Housing related web links http://www.brookes.ac.uk/schools/planning/hslinks.html 3 European Mortgage Federation: http://www.hypo.org/ GREG-The Greek Real Estate Group http://www.greekreg.com/ Jones Lang LaSalle: Real Estate and Investment Management Services: http://www.joneslanglasalle.com/ IDEAS: Journal of Real Estate Research, American Real Estate Society: http://ideas.uqam.ca/ideas/data/jreissued.html Body of Sworn-in – Valuers of Greece: http://www.soe.gr

INDICATIVE CONTENT: 1. The real estate (RE) market. 1.1 Meaning 1.2 Technical characteristics 1.3 Economic characteristics 1.4 Types of interest (freehold, leasehold, etc.) 1.5 Functions of the market 2 Integration of RE market and the macroeconomy 2.1 Capital stock adjustment models 2.2 The DiPasquale-Wheaton model 2.3 Estimation of long-run supply 2.4 ‘Rational’ pricing vs ‘myopic’ pricing 2.5 Building cycles 3 Investment in real property 3.1 Investment characteristics of different interests 3.2 Types of investors 3.3 Yield on investment assets in general 3.4 Yield on property assets 4 The development process 4.1 Nature of development 4.2 Problems of the developer 4.3 Choosing between capital projects-RE appraisal 4.4 Estimating demand 4.5 Optimum construction outlay 4.6 The intensity of land use 4.7 The amount which can be paid for the site 5 The construction industry 5.1 Nature 5.2 Conditions of demand and supply in construction Industry 5.3 Pricing the product 5.4 Structure of the industry 5.5 Greek vs British –cum-American construction industry: the exchange arrangement ( antiparokhe ) vs. building on totally owned land 6 Timing redevelopment – an NPV application 7 House prices and property price indices 7.1 Problems of house price indices 7.2 The hedonic method of house price appraisal 8 Urban pattern and growth 8.1 Land use and land values 8.2 Pattern of urban land use 8.3 Growth of urban areas 4

9 Housing finance and loan types 9.1 Systems of housing finance (credit-based, own-fund- based, state provision. 9.2 Types of housing loans (repayment, endowment, capped, etc.)